Close inspection of the dotDigital (LON:DOTD) share price reflects a decisive shift in the tectonic plates that underlie the digital marketing world.
In the last six months it has advanced more than 40 per cent as a wave of consolidation has swept the sector.
The $169 million takeover of iContact by America’s Vocus and the $94m acquisition of Germany’s eCircle by the data warehousing giant Teradata are two of the headline-grabbing deals.
Even Twitter has acknowledged the effectiveness of email marketing with the purchase last week of personalised email marketing provider, RestEngine.
The IPO of ExactTarget, meanwhile, set a new benchmark for valuations of companies in this space as it made its stock market debut with a price tag of US$1.2 billion.
Today it is worth an impressive $1.6 billion - not bad for a company with sales of little of over $200 million and losses of $35 million.
The point is that AIM-listed dotDigital is swimming in the same pond as these highly prized businesses.
Its dotMailer business fires out around 2.5bn marketing emails a year and is responsible for around two-thirds of the company’s revenues; the majority of which are recurring.
However it is one of a suite of products, which includes dotSurvey, created to take on SurveyMonkey in the electronic survey space.
And there’s also dotAgency, the digital marketing specialist, and dotCommerce, which provides bespoke services to customers.
What marks out all of the company’s products and services is the fact they are intuitive and easy to use.
DotMailer, for instance, is created for use by the marketing fraternity, which is not the most naturally tech-savvy audience.
Yet many of the products currently around require more than just basic computer literacy, says dotDigital chief executive Peter Simmonds.
“We are in the business of taking away the pain from marketing people's day,” he explains.
“We have a very simple philosophy: people didn’t go into marketing because they secretly wanted to go into IT and they didn’t go into marketing because they wanted to be an accountant.
“So we try to make those bits easier. We make it so that a person can pass a powerpoint to their boss that shows the return on investment they got on their marketing.
“Essentially our philosophy is apps with the power of Nasa technology but the simplicity of a Fisher Price interface”
The drag and drop facility makes it straightforward to construct an email, while the platform itself is both flexible and scalable.
A huge vote of confidence in dotMailer came last month when it was revealed that the platform would be woven into the “fabric” of eBay’s new e-commerce offering.
The agreement came about as a result of a “an existing relationship” with eDialog, now part of the eBay empire.
Offering email marketing services such as dotMailer is part of the X-Commerce initiative, the auction site’s fight-back against Amazon, and the hugely popular and successful Amazon Marketplace.
For dotDigital it is a huge endorsement for its lead product, though those who have followed the company’s progress will know that around 200 large corporate clients such as Nationwide, EDF, Land Rover, Sage, LV, DHL, Logitech use the service.
The large corporates are by far the smallest grouping – it supplies 1,500 small businesses and 2,000 medium-sized firms – but it is probably the most important in terms of future growth.
The company has used outside experts to carry out an own in-depth security audit, which it can hand to these influential blue-chip firms and that provides them with a degree of comfort as does the dotDigital’s PLC status.
And there are other less tangible elements of the service, such as its flexibility, which are helping win new clients.
“We have always had the features that enterprise clients demand including the facility to create almost an unlimited number of child accounts , a hierarchy of user permissions and flexible billing to individual cost centres,” says Simmonds.
“We are increasingly seeing our ease of use and great features appeal to corporate customers and partners. We can even provide our products in the clients’ own branding.”
Further growth with these larger companies will be aided with translation of dotMailer into a number of foreign languages, which will allow multi-nationals to roll it out across a number of different countries.
It also opens up new, overseas marketplaces for the product, which is likely to be licensed out to re-sellers around the world.
All of this means dotDigital is entering an interesting and potentially very exciting phase of its development.
What marks dotDigital out from the pack is that is has got to this turning point under its own steam.
Growth has been funded from cashflow and not from the deep pockets of some venture capital fund, which has meant the group has been prudent and financially very disciplined since inception.
“We have been profitable and cash generative all the way through despite massively innovating on product, and investing in marketing,” says Simmonds.
I’m a bit old-fashioned in that I believe business is all about generating profits and cash.
“If you don’t have the discipline of making money you don’t make the best decisions.”
The company’s broker Charles Stanley is forecasting the company will post pre-tax profits of £2.8 million this year on sales of £11.8 million, rising to £3.5 million on revenues of £14.9 million.
The forward price to earnings ratio of 15 times net profits would look a bit toppy if this was a dividend paying defensive stock.
However dotDigital is actually trading at a 50 per cent discount to the software and computer services sector.
And this forgets the exit multiples being achieved for the slew of businesses sold recently, which are higher again.
At some point some bright spark somewhere will spot the valuation anomaly.
The point is not lost on Simmonds. “There is a lot going on in this space. People who are not in this space are desperate to be in it.”